Emerson Manufacturing Company produces two products: Model S and Model Z. The following income statement shows this year's operating results.
Emerson Manufacturing Company
Income Statement
For the year ended December 31
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Revenue:
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Model S
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$300,000
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Model Z
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200,000
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$500,000
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Cost of goods sold:
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Model S
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$150,000
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Model Z
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120,000
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(270,000)
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Gross margin
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$230,000
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Operating costs:
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Marketing
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$60,000
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Distribution
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50,000
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Depreciation
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21,000
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Administration
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30,000
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(161,000)
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Operating income
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$69,000
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Emerson's management is in the process of preparing next year's budget. The following information is under consideration.
a. Selling price of Model S is expected to remain the same, but the units sold will increase by 6 percent
b. Selling price and units of Model Z will increase by 5 percent and 10 percent, respectively.
c. As indicated by the suppliers of key components, the cost of each unit sold will increase by 3 percent.
d. Marketing costs are expected to increase by $20,000.
e. Distribution costs remain the same fixed percentage of total sales revenue.
f. Depreciation costs remain unchanged.
g. A new administrative aide will be hired part time for $25,000.
h. There is no beginning or ending inventory.
Required:
Prepare a budgeted income statement for next year.